In Kuala Lumpur
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MALAYSIA is likely to see more corporate activity, including better-quality listings, now that equity ownership rules have been eased, analysts say.
But because economic conditions are weak, activity is only expected to pick up in six to 12 months. Fear of a bad debut has been reflected in a meagre two listings so far this year, compared with 23 in the whole of 2008.
With the economy in recession and expected to contract as much as 5 per cent this year, many listing aspirants have chosen to bide their time.
And given the recent decision to ease ownership rules for initial public offerings (IPOs) and takeovers, this could work out to be a good move.
New listings no longer need to sell 30 per cent of their stock to bumiputras, and need only to dispose of half of the minimum free float of 25 per cent - that is, 12.5 per cent.
Fulfilling the 30 per cent bumiputra quota and 25 per cent free float has been a huge deterrent to new listings, since shares often had to be sold at cheaper prices to meet the first requirement.
Because of this, quality growth companies and multinationals that had alternatives were unlikely to list on Bursa Malaysia.
In a Malaysia Strategy Note, JPMorgan Malaysia said it expects the change in quota rules - which also govern post-IPO fund raising - 'to have very positive implications for the domestic stock market'.
Another perceived plus - which could lead to higher dividend payouts - is that bumiputra 'top-up' rules have been lifted. Under the previous rules, a company that planned to raise funds or restructure had to ensure the bumiputra portion was not diluted. In the past, controlling shareholders of non-bumiputra firms viewed this requirement as onerous.
With market conditions far from optimal, few expect a quick pick-up in corporate activity. Investors also need to be convinced of policy execution before committing funds.
Bursa Malaysia has set a target of 30 to 40 IPOs annually. It is hoping to find among these larger entities as well as foreign firms, following the maiden listing this month of Chinese shoe maker Xingquan International Holdings.
To give bursa a shot in the arm, Prime Minister Najib Razak has urged owners of Maxis Communications to consider re-listing the mobile telco as soon as possible. Tycoon Ananda Krishnan took the former blue chip private in 2007, selling a quarter of its shares to Saudi Telecom Co. According to Mr Najib, Maxis is 'seriously considering' re-listing in Malaysia.
He has also courted China and the Middle East to invest more in Malaysia. This week he said Abu Dhabi would step up its investments and start with US$1 billion, which both Abu Dhabi and Malaysia plan to co-invest locally via sovereign wealth funds, in the energy, real estate and hospitality sectors.
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